After a surprisingly long period of strength against the US Dollar, the British Pound's value has been falling and sat at a steady 1.38 after falling from its strong point of 1.41 which had been sustained for quite some time. Who cares? That isn't much, you may say.
Well, considering the low volatility and the high value of the Pound since around the beginning of May, something has moved it, and the mainstream media has been wide of the mark.
It is all too politically correct and easy to blame it on Brexit or COVID restrictions, but is something as broad as Brexit really enough to dent what was an almost flat line for a number of weeks? Not really. Nor is something as restrictive as the collective prattling from the leaders of the G7 nations, all absolutely obsessed with lockdowns, and all equally signed up to the climate ruse to the extent that they may ban the hot air that comes out of their mouths as that is enough to cause global warming in its own right.
Joe Biden and Boris Johnson are cast from the same stone, therefore the difference is not likely to have been caused by Brexit or COVID restrictions, as both the United States and United Kingdom are suffering an economic decimation of gigantic proportions due to their lockdown draconianism. It is more like that China's cryptocurrency ban is behind it.
Just a few weeks ago, the Chinese government inevitably banned cryptocurrency, as it does not sit well with the communist government's method of controlling its population's liberties via restrictions on capital movement. Today, the Agriculture Bank of China (AgBank), the country’s third mainstream bank by assets, is the latest to follow guidance from the People's Bank of China to clamp down on cryptocurrency trading and mining activities.
The People's Bank of China is the country's central bank and is owned and operated by the Communist Party of China. AgBank is the first major state bank to make a public statement against cryptocurrencies after China’s State Council (government) last month vowed to crack down on bitcoin trading and mining activities. If a client is found to be involved crypto trading, its account would be immediately shut, and relationship cut, the lender said in the statement.
This goes hand in hand with President Xi Jinping's insistence that the US dollar is here to stay as the defacto method of settling overseas transactions by Chinese business and that the plans by China's government to introduce its own digital version of the Yuan is purely intended to be used for the government to control the behavior of the general public within China's borders rather than a means for Chinese businesses to use the Yuan internationally.
The official line is that the proposed digital Yuan will help the government impose and maintain capital controls on its population, monitor consumer behaviour and control the retail market, whereas settlements for large companies will be done in the US Dollar, just as they are now. So vast is the Chinese export industry that FX settlements in US Dollar from Chinese industry is enormous.
The notion that this is to be preserved is enough to move the Dollar
In September 2020, The People's Bank of China and the Chinese FX regulator SAFE announced that the QFII and RQFII, the two major inbound investment programs, would be combined starting in November. Other changes include simplified application, shorten review cycle, no restriction on intermediary, reduced data submission requirements and expanded scope of investment. Separately SAFE granted additional US$3.36 billion to 18 institutions under QDII scheme, bringing the total scheme to US$107.34 billion between 157 institutions.
That, added to the confirmation that the digital Yuan is intended for domestic use only and the outlawing of cryptocurrency should be enough to reinforce that the dollar's dominance is here to stay.
